Chris Oleksy05.03.06
Your Supply Chain Picture Is Worth a Thousand…$…
Chris Oleksy
Chris Oleksy |
In the inaugural columns to this series, the Supply Chain Operations Reference (SCOR) model was used as the foundational model for describing the tenets of the supply chain. In a subsequent column, the SCOR model was expanded to cover value chain tenets. When mapping your supply chain, it is wise to map the value chain as well as the supply chain. For our purposes here, we’ll only cover the supply chain.
What Is a Supply Chain Thread?
If you were to purchase a fine set of sheets, you would look at thread count. A sheet is made up of many different threads to create a thread count. Generally speaking, the more threads, the higher the value.
In supply chain language, a supply chain is composed of many individual or separate supply chains. These are often referred to as “threads.” Unlike buying sheets, it is not likely that the more threads you have, the higher the value of the supply chain. Many times, the more threads your organization has, the more waste opportunities that exist.
To map your supply chain “threads,” it helps to create an illustration to visualize these components. Figure 1 is an example of this process and will guide you through the step-by-step instructions that follow.
Color-Coded Mapping
Start by identifying the supply base and drawing representative boxes for this base. Often, there are so many suppliers that it’s difficult to draw boxes for each supplier (unless your organization has minimal suppliers).
To make it easier, many approaches can be used for representing the “consolidated” supply base. For example, commodity types are often used such as corrugate or plastics, etc. In addition, geographic consolidations can be used, such as Eastern United States, Western United States, Europe and so on. What is important is that you understand the concept of color-coding your supply chain threads—recognizing that you can achieve this through many approaches.
In Figure 1, each box has been designated as a specific supplier for ease of explanation. These supplier boxes are color-coded with green. Once you have completed this process on your own map, it’s time to represent your manufacturing entities by using a different color (such as blue, shown in the figure).
Repeat this process for the balance of the entities that comprise your supply chain, using different colors for each major entity (eg, Source, Make, Deliver, etc).
Using arrowed lines, connect the flow of product between the boxes; color-code these lines as well. In most cases, these lines will all be diagrammed in one color, such as red (to signify cost). In many instances, movement of product from one portion of your supply chain to another is non-value-added activity that results in cost; therefore, displaying this movement is valuable. This exercise is especially helpful if your organization imports and exports goods across international borders.
Once you have created a pictorial representation of your supply chain, place letters inside the boxes that signify each entity. If utilizing the SCOR model, each of these has various designations to further describe the entity, such as “make to order,” “make to stock,” “engineer to order” and so on.
You can map your supply chain to as fine a level of granularity as needed. The reason for doing this is to better help you configure the business processes correctly. For example, managing a supply chain thread that has “make to stock” versus “make to order” components functions differently. The planning, scheduling and manufacturing activities differ depending on whether it is a “make to stock” or “make to order” supply chain thread. It is up to you to determine what level of granularity you need.
Differentiating Your Threads
Depending on your end expectation, color-coding can be used in a variety of ways.
In Figure 2, a supply chain thread is color-coded instead of the entities. These threads appear like subway lines and help differentiate between one thread versus another. This may be helpful if your threads are mutually exclusive of each other and your business processes should be geared around the management of individual threads.
Threads Configure Processes
By looking at Figure 1, you will notice a thread of A -> F -> I -> O. Generally, this thread will be called AFIO. Another thread would be A -> F -> G -> J -> M -> O. Likewise, you can call this thread AFGJMO.
Review Figure 1 and determine how many other paths (threads) you can identify. The concept is to take these threads and understand everything you can about them so you can build business processes to manage them.
For example, notice various informative depictions on Figure 1, such as the annual freight cost from A -> F of $2 million—or $2.3 million annually to move product from entity F to I. You will also notice 212/440,000 for 212 product codes and 440,000 annual units produced at entity F.
You can customize either Figure 1 or 2 to any level of granularity to achieve your end result. For example, if your goal is to minimize freight expenditures, you may gear your threads toward information on the movement between entities.
Other important analysis on business processes also should be performed, such as determining how the organization would plan or schedule a specific thread, as well as identifying whether personnel should be organized according to threads. Large corporations often complete many acquisitions and end up with various overlapping threads that are ripe for consolidation. And, usually, this is not recognized until the threads are pictorially displayed. The list of questions you can now ask yourself goes on and on…
The important thing to understand from mapping is that you need to understand the visual portrayal of supply chain threads to differing degrees of granularity. Since pictures speak a thousand words, you will quickly see how to improve your supply chain composed of many threads. When was the last time you mapped your supply chain to create not only a thousand words, but millions of dollars?